When trying to create a new project or trying to open a project the user gets "Create Project - Reading Permission". this happens right at the end when tables etc have been read on the database I'm trying to connect. what permissions do I need to have extra.

the DB is on a server where the user has access to few of the 30+ db. the user is flagged as Owner/ Public to this DB

For SQL Server 7 or SQL Server 2000, SQL Prompt requires administrative or dbo or Sys Admin permissions.
For SQL Server 2005 you can use the same permissions as for SQL Server 7/2000 or alternatively you can use the GRANT VIEW DEFINITION TO [{username}] which provides SQL Prompt with permission to retrieve the metadata without giving dbo access.

For SQL Server 2008, it may be necessary to grant VIEW SERVER STATE to access information about encryption keys otherwise a 'User does not have permission to perform this action' message may prevent the display of candidates.